The Wall Street Job Report

Blackstone Names 11 New Senior Managing Directors

Stephen Schwarzman, Blackstone Chairman

DealBook, December 21, 2010

The Blackstone Group, the private equity behemoth, named 11 new senior managing directors on Monday, effective Jan. 1, according to an internal e-mail.

Among those promoted:

Peter Rose (External Relations & Strategy), Robert Petrini (GSO), Darren Richman (GSO), Robert McMullan (Investor Relations & Business Development), Alexander Moomjy (Park Hill), Shan Fu (Private Equity), Anjan Mukherjee (Private Equity), Robert Reid (Private Equity), Patrick Bourke (Private Equity – Operating Partner), Stuart Grant (Real Estate) and Chris Heady (Real Estate).

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Blackstone Names Chief for Asia

Peter Lattman, DealBook, December 13, 2010

Blackstone Group named Michael Chae, one of its most senior deal makers in the United States, to head the firm’s private equity business in Asia. He will be based in Hong Kong.

The move underscores the private equity industry’s shifting focus to regions outside the United States, particularly Asia. Blackstone’s president, Hamilton James, has said that he expects roughly half the firm’s deals to be in Asia next year. And Stephen Schwarzman, the firm’s co-founder and chief executive, is relocating to Europe for three to four months next year, in part to oversee the firm’s international portfolio and be close to Asia, where he spends much of his time.

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2nd UPDATE: PIMCO's Gross: Making A Move Into Equities

Enda Curran, The Wall Street Journal, June 15, 2010

SYDNEY (Dow Jones)--Pacific Investment Management Co., one of the world's biggest bond managers, is beginning to invest in equities, Bill Gross, founder and co-chief investment officer told CNBC television Wednesday.

Famous for its prowess in fixed income, PIMCO's move into equities herald's a new route for the company's investment strategy and underlines a divergence in the returns available between bonds and stocks.

Gross said the decision to buy stocks has been in the making for some time, well before the eruption of the global financial crisis.

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Private Equity Had Role in Crisis, Says Carlyle Co-Founder

Above: Co-founders of Carlyle Group David M. Rubenstein, William E. Conway, Jr., and Daniel A. D'Aniello.

Thomas Heath, The Washington Post , October 14, 2009

Carlyle Group co-founder David M. Rubenstein acknowledged Tuesday at a conference on private equity in Dubai that his industry helped drive the recent financial bubble, whose eventual implosion contributed to the credit crisis and the current recession.

"Private equity contributed to the problem," Rubenstein said, according to a Carlyle spokesman who was present at the speech. "I think we made some mistakes ourself."

Rubenstein was referring to the rise in prices that Carlyle and other private-equity firms paid to buy assets, offers driven by cheap credit and loose loan terms that allowed private equity to put up very little of its own money.

During the private-equity heyday of 2006 and 2007, firms put together deals worth tens of billions of dollars to buy companies, saddling the acquired companies with huge debt burdens. The subsequent market crash and financial meltdown reduced the value of many of those acquisitions, forcing some private-equity firms to write down their investments. In addition, falling revenue caused by the recession has made it difficult for some firms to make their debt payments.

"Clearly we contributed a little by paying higher prices. We rely on very cheap debt. It was intoxicating to get debt with no covenants," Rubenstein said. "People wanted to do more and more deals, and there was a greater focus on very large deals."

Rubenstein's comments came in a wide-ranging speech in which he said private equity is in a lull because of difficulty in getting access to credit. But Rubenstein predicted that the industry will have a rebirth that will be characterized by smaller funds, more transparency to investors and the media, more partnering with others, and new sources of equity and debt.

Meanwhile this week, Carlyle rival Blackstone Group reportedly plans to sell several of its companies, a sign that markets are starting to recover from one of the worst recessions in history.

In a letter to investors last week, according to the Wall Street Journal, Blackstone chief executive Stephen A. Schwarzman said his firm was planning to sell eight companies through initial public offerings and was in the process of selling others.

Carlyle said that it, too, is planning take several companies public, including three that will be listed in Asia and two in the United States.

Carlyle, of the District, is one of the world's largest private-equity firms, with more than $86 billion under management. Lately, the firm has been investing in banks. A year ago, Carlyle invested $75 million in Boston Private Financial Holdings. In August, it was part of a group that injected $900 million into Florida's BankUnited.

More recently, Carlyle and a partner bought out of bankruptcy a Michigan manufacturing company known as Metaldyne for $450 million.

Rubenstein, who founded the buyout company two decades ago with Daniel A. D'Aniello and William E. Conway Jr., said the current recession is about over. He said he expects economies in developed countries to grow at 2 to 3 percent annually, while emerging markets could grow as much as 6 to 10 percent.

Rubenstein also said he expects U.S. dominance of the private-equity industry to decline over time.

China to draw foreign investments via partnership rule

By George Chen, Reuters, September 3, 2009

HONG KONG - China plans new rules to allow foreign companies to set up local units in the form of a locally registered partnership, in a landmark move to attract investment, a draft proposal seen by Reuters showed on Thursday.

The new rules are expected to mainly affect foreign investment, law and accounting firms. But foreign companies that want to form local partnerships must seek approval from China's Ministry of Commerce (MofCom), the document said.

Beijing has historically viewed private equity funds as speculators, though its attitude toward foreign investors has changed in recent years, partly as the government sought to maintain fast economic growth and create more jobs.

"Of course, this is a very positive move by the government but I just feel it's not enough," said one long-time foreign institutional investor in China, adding restrictions remain for foreign-invested partnerships to invest in some sectors.

Many foreign investors have long complained about difficulties in making deals in China.

Last year, U.S. buyout giant Carlyle Group CYL.UL walked away from three years of negotiations to buy Xugong, China's top construction equipment maker, after running into bureaucratic obstacles.

For foreign invested partnership companies in China, some restrictions for dealmaking will remain.

"It's interesting that foreigners cannot avoid the MofCom and NDRC approval processes (to make deals in China) by setting up through these foreign-invested partnerships," said Maurice Hoo, a Paul Hastings lawyer.

The National Development and Research Commission (NDRC) is China's top economic planner.

WELCOME TO CHINA, BUT?

The MofCom, NDRC and other relevant government agencies have been studying and drafting the new rules for foreign-invested partnerships in China for more than a year.

The document seen by Reuters on Thursday is a copy of the final draft, which some lawyers and financial industry sources said would be issued by Beijing soon.

Foreign investment firms can now only register in China as a representative office of its parent company or as an advisory service provider, rather than as a partnership company.

The rules offer a new path for foreign investment in China.

One benefit of the new rules is that foreign private equity firms can more easily raise local yuan funds to invest in Chinese enterprises in the name of its local partnership, lawyers said. 

But some private equity firms briefed on the new rules were disappointed that foreign partnerships still require approval from the Chinese authorities, said industry sources, who declined to be identified due to the sensitive nature of the matter.

"It requires approval from the commerce ministry and its local branch offices, so it's more restrictive than forming local partnerships," said Paul Hasting's Hoo.

Currently, Chinese companies and Chinese nationals who want to set up a partnership, need only submit tax and commercial registrations at the local government level, which can often be completed in a matter of weeks.

Pension funds back buy-out fight over bank deals

By Francesco Guerrera and Joanna Chung, The Financial Times, August 19, 2009

A coalition of large US state pension funds has backed the private equity industry’s opposition to new rules on takeovers of troubled lenders, saying the plan would have a “chilling effect” on attempts to revive the country’s banking system.

The warning by funds from states including New York, New Jersey and Oregon, which manage billions of dollars on behalf of public workers and are big investors in private equity, will strengthen the buy-out industry’s lobbying against the proposed measures.

Under the planned rules, unveiled by regulators last month, private equity groups that buy a troubled bank would have to maintain its tier one capital ratio – a measure of financial strength referring to a bank’s equity capital and reserves – to 15 per cent of assets. This would be three times the level of other banks. Buy-out funds would also be banned from selling their lenders for three years.

Executives argue that the rules would deter private equity from investing in failing lenders just as regulators are scrambling to find buyers for regional banks hit by the crisis.

In a letter to the Federal Deposit Insurance Corporation, which is to decide on the rules in the next few weeks, the state pension funds say the measures would have “a chilling effect on private capital participation in the acquisition of failed banks”.

“The 15 per cent capital requirement is unduly restrictive and will limit the ability of these banks . . . to be recapitalised,” write the investors, which include funds from Connecticut, North Carolina, Pennsylvania, Florida and Missouri. “The combined effect of discouraged participation, low-ball bids and induced focus on high-risk activities would make this programme unsuccessful.

The FDIC has indicated it might lower the capital requirement in its final rules – partly because another banking regulator, the Office of the Comptroller of the Currency, has also raised concerns about the proposals – but has not said to what level.

Private equity bidders have not been a factor in the auctions of failing banks in recent months.

No buy-out fund is believed to have bid for Colonial, an Alabama-based bank that was sold to BB&T, another regional lender, last week.

Private equity firms are also not expected to feature among the lead bidders for Guaranty Financial, a struggling Texas bank which is being sold by the FDIC.

Private equity firms’ opposition to the new rules is heightened by the fact they have struggled to find lucrative investment opportunities since the onset of the financial crisis cut off their supply of cheap debt. Many had hoped to be able to put some of their vast funds to work on failing banks.

In its comments to the FDIC, for example, Lone Star, a large private equity firm that has spent $60bn buying distressed banks and other financial assets around the world, said the proposed rules displayed a “strong bias against, and suspicion of, ‘private’ capital”.

Former Dow Jones Chief Lands a Private-Equity Job

By PETER LATTMAN for The Wall Street Journal, July 17 2009

Richard Zannino, the former chief executive of Dow Jones, landed a job in private equity.

Mr. Zannino is joining CCMP Capital Advisors, a New York buyout firm with $10 billion under management. Formerly known as J.P. Morgan Partners before J.P. Morgan Chase & Co. spun it out in 2006, CCMP's holdings include sandwich shop Quiznos Subs, AMC Entertainment and Spanish cable operator Grupo Corporativo Ono.

The 50-year-old Mr. Zannino resigned as CEO of Dow Jones & Co., publisher of The Wall Street Journal, in January 2008 after News Corp.acquired the company for $5 billion. He joined Dow Jones in 2001 as chief financial officer after holding senior finance, strategy and operating positions at several companies, including Saks and Liz Claiborne.

"I came to realize that private equity is a natural next step," said Mr. Zannino, who last month joined the board of Internet media firmIAC/InterActiveCorp.

He will sit on CCMP's investment committee and co-head its consumer, media and retailing practice. He joins another recent hire, corporate executive Greg Brenneman, who joined last August as chairman. While CCMP has been hiring, it has been quiet as a deal maker during the financial downturn. Last month it offered $202 million to buy Eddie Bauer out of bankruptcy.

FACTBOX-Private equity funds closed in last 12 months

Below is a list of the private equity funds over $5bln in size
that have closed in the last 12 months.

 
Below is a list of the private equity funds over $5bln in size
that have closed in the last 12 months.
 
 Fund                             Manager        Type           Size          Investment Focus
 
 TPG Partners VI                  TPG            Buyout         $17.8 bln      Global
 Apax Partners VII                Apax Partners  Buyout         11.2 bln euros Europe
 Warburg Pincus X                 Warburg Pincus Balanced       $15 bln        Global
 Apollo Investment Fund VII       Apollo         Buyout         $14.8 bln      North America
 CVC European Equity Partners V   CVC            Buyout         11 bln euros   Western Europe
 Carlyle Partners V               Carlyle Group  Buyout         $13.7 bln      Global
 GS Mezzanine Partners V          Goldman Sachs  Mezzanine      $13 bln        North America
 Blackstone Real Estate VI        Blackstone     Real Estate    $10.9 bln      Global
 OCM Opportunities Fund VIIB      Oaktree        Distressed     $10.9 bln      U.S.
 Advent Global PE VI              Advent         Buyout         6.6 bln euros  North America,
                                                                            Western Europe
 Bain Capital Fund X              Bain Capital   Buyout         $10 bln        Global
 First Reserve Fund XII           First Reserve  Natural        $9 bln         Brazil, China,
                                              Resources                     India, U.S
 KKR European Fund III            KKR            Buyout         6 bln euros    Europe
 PAI Europe V                     PAI            Buyout         5.4 bln euros  Europe 
 Lone Star Fund VI                Lone Star      Real Estate    $7.5 bln       Germany, Japan,
                                                                            U.S.
 Bridgepoint Europe IV            Bridgepoint    Buyout         4.8 mln euros  Europe
 Avenue Special Situations V      Avenue Capital Distressed     $6 bln         North America
 Nordic Capital Fund VII          Nordic Capital Buyout         $4.3 bln euros North, Western
                                                                            Europe
 Global Infrastructure Partners   Global Infra.  Infrastructure $5.64 bln      Global
 Bain Capital Europe III          Bain Capital   Buyout         3.5 bln euros  Europe
 GS Vintage Fund V                Goldman Sachs  Secondaries    $5.5 bln       North America
 Charterhouse Capital Partners IX Charterhouse   Buyout         4 bln euros    Western Europe
 Kelso Investment Associates VIII Kelso          Buyout         $5.125 bln     North America
 New Mountain Partners III        New Mountain   Buyout         $5.1 bln       North America
 
Source: Reuters